1. Relevant Legislation and Rules Governing Franchise Transactions

1.1 What is the legal definition of a franchise?

Under French law, there is no regulation that defines a franchise. The franchise definition has been constructed by the French Courts and authors, and any relationship containing the following elements is considered a franchise agreement:

a right to use a registered trademark; and

the transfer of know-how.

Even if the relationship is not qualified by the parties as a franchise agreement, each agreement containing the abovementioned elements might be regarded as a franchise agreement, and implies that the Franchisor provides the Franchisee with support, the final aim being the profitability of the franchise business.

1.2 What laws regulate the offer and sale of franchises?

The offer and sale of franchises is specifically regulated by articles L.330-1 and R.330-3 of the French Commercial Code – which covers in general all exclusive trademark licence relationships.

Franchise operations are also governed by French contract rules which are established in the French Civil Code, as well as by the general rules applying to all commercial relationships in the French Commercial Code.

1.3 If a franchisor is proposing to appoint only one franchisee/licensee in your jurisdiction, will this person be treated as a “franchisee” for purposes of any franchise disclosure or registration laws?

Yes, this person will be regarded as a “Franchisee” and treated as such even if it is the only franchisee in the French territory. However, if this unique “Franchisee” is entitled to sub-franchise its rights in the French territory, it may be regarded as a “Master Franchisee”.

1.4 Are there any registration requirements relating to the franchise system?

Under French law, the only registration requirement relating to the franchise system is to deposit and register the trademark that will be granted to the Franchisee.

There is, however, no obligation on the Franchisor to register their franchising activity, or to register the franchise agreements executed with Franchisees. The trademark licence granted to the Franchisee may, however, be registered before the trademark office that has generated the related trademark (for a national brand, said office is called “INPI”), even if there is no obligation to do so.

1.5 Are there mandatory pre-sale disclosure obligations?

Pursuant to article L.330-3 of the French Commercial Code, the Franchisor must provide the Franchisee with a “Pre-contractual Information Document” (disclosure document) at least 20 days before the signing of a franchise contract, and at least 20 days before the payment of any sum or any investment in relation to the franchise relationship.

This disclosure document shall contain the following information, which is detailed at article R.330-1 of the French Commercial Code:

their trademark registration number and registration number of the trademark licence agreement, if relevant;

the Franchisor’s banking information (bank address, account number);

the Franchisor’s audited financial statements regarding the past two years;

the history and presentation of the company and of the network;

the general and local market “statements” (presentation) and development prospects of the general and local market;

a list of the undertakings of the network, and the nature of their relationship with the Franchisor (franchise agreement, subsidiaries, joint ventures, etc.);

the address of the franchised undertakings located in France, conclusion and renewal dates of the related franchise contract;

the number of Franchisees which have left the network the year before the issuance of this document, detailing whether this has resulted from expiry, cancellation or termination of the contract;

the presence of any undertaking member of the network in the same territory, and distribution of services or products that are the subject of the franchised business in the same territory;

the most important provisions of the contract: duration; renewal; termination; assignment; exclusive rights; and

the investments linked to the franchise operation.

The Franchisor shall also deliver any other information that may be relevant in the candidate’s decision to enter into the franchise agreement. This general obligation was incorporated into the French Civil Code in 2016.

1.6 Do pre-sale disclosure obligations apply to sales to sub-franchisees? Who is required to make the necessary disclosures?

Yes, the obligation to provide a pre-contractual information document complying with articles L.330-3 and R.330-1 of the French Commercial Code also applies to sales performed to Sub-Franchisees. The Master Franchisee in charge of recruiting the Sub-Franchisees located in France shall thus provide the candidate for a sub-franchise agreement with the precontractual information document at least 20 days prior to the related sub-franchise agreement’s execution and at least 20 days before any payment or investment in relation to the sub-franchise relationship.

1.7 Is the format of disclosures prescribed by law or other regulation, and how often must disclosures be updated? Is there an obligation to make continuing disclosure to existing franchisees?

The disclosure document shall contain the information listed at articles L.330-3 and R.330-1 of the French Commercial Code, which are detailed in question 1.5 above. However, there is no format prescribed by the law.

The disclosure document shall be updated for each candidate.

There is no obligation to provide updated information to the current Franchisees during the franchise relationship.

1.8 What are the consequences of not complying with mandatory pre-sale disclosure obligations?

The consequences are the same as those described in question 5.1 below.

1.9 Are there any other requirements that must be met before a franchise may be offered or sold?

French Courts dictate that the Franchisor has a duty to experiment with or test the concerned business and concept before franchising it, and will usually request the Franchisor to prove that the concept has been operated in owned operations for at least two years before the franchise development started, and that this experimentation has been profitable.

1.10 Is membership of any national franchise association mandatory or commercially advisable?

Membership of a national franchise association is not mandatory. However, membership of the French Federation for Franchising (Fédération Française de la Franchise) is advisable, inter alia, since the Fédération Française de la Franchise provides training regarding franchising in France, and contributes to Franchise Expo Paris, which is a well-known annual French franchise exhibition.

1.11 Does membership of a national franchise association impose any additional obligations on franchisors?

The Fédération Française de la Franchise will, inter alia, verify if the franchise disclosure document and franchise agreements comply with the European Code of Ethics for Franchising.

1.12 Is there a requirement for franchise documents or disclosure documents to be translated into the local language?

There is no mandatory obligation to translate the documents into French. However, translation is strongly advisable, particularly in order to be able to prove that the Franchisee has been provided with clear and understandable information before signing the franchise agreement.

In the course of a litigation, French Courts will require an official translation of any documents drafted in a foreign language.

2. Business Organisations Through Which a Franchised Business Can be Carried On

2.1 Are there any foreign investment laws that impose restrictions on non-nationals in respect of the ownership or control of a business in your jurisdiction?

No, there is no longer any such regulation under French law, unless it concerns sensitive sectors that might cause harm to public policies, public security, national defence interests or activities related to the production of weapons. In these limited cases, the related investment shall be subject to the Minister of Economy’s prior approval and declared to the French Treasury Tax Department.

2.2 What forms of business entity are typically used by franchisors?

Private limited liability companies – such as société par actions simplifiée, société à responsabilité limitée or société anonyme – are usually chosen by Franchisors. These three types of company are easy-to-build vehicles for the operation of commercial activities in France. The Franchisor will choose the most accurate type, taking into account its resources as well as social and tax considerations.

2.3 Are there any registration requirements or other formalities applicable to a new business entity as a pre-condition to being able to trade in your jurisdiction?

Even if the Franchisor is operating through a foreign company, there are obligations to be registered with the French Répertoire des Entreprises (register for undertakings) or the National Centre for Foreign Companies, as well as the French law administration.

3. Competition Law

3.1 Provide an overview of the competition laws that apply to the offer and sale of franchises.

The offer and sale of franchising is regulated by:

Articles L.420-1 and subsequent of the French Commercial Code, which prohibit anti-competitive practices where they are intended to: fix prices; restrict market access; restrict or control production, opportunities, investment or technical progress; or divide up markets or sources of supplies. Any abuse of a dominant position or economic dependency, and any predatory pricing that might upset the balance of economic activities, are also prohibited. However, such anti-competitive practices might become permitted if they lead to economic progress and give final users a fair share of the resulting benefits. But the agreement must not afford the parties the possibility of eliminating competition in respect of a substantial part of the related products.

Articles L.442-1 and subsequent of the French Commercial Code, which prohibits restrictive trade practices, such as resale below costs and the “brutal” termination of established commercial relationships.

Franchise networks active in France shall also comply with the European regulation regarding anti-competitive practices. In particular, Commission Regulation EU no. 330/2010 of April 20th, 2010 (on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices) shall apply, together with the Guidelines on Vertical Restraints 2010/C 130/01.

3.2 Is there a maximum permitted term for a franchise agreement?

There is no maximum permitted term provided per se for franchise agreements. However, exclusive supply agreements are only permitted for a limited duration. See question 3.3 below.

3.3 Is there a maximum permitted term for any related product supply agreement?

Pursuant to article L.330-1 of the French Commercial Code, any exclusive supply agreement shall be limited to 10 years.

3.4 Are there restrictions on the ability of the franchisor to impose minimum resale prices?

French and EU regulations prohibit the imposition of any minimum resale prices.

3.5 Encroachment – are there any minimum obligations that a franchisor must observe when offering franchises in adjoining territories?

Under French law, the Franchisor has no obligation to provide the Franchisee with an exclusive territory. If he does so, the Franchisor has a duty not to open – directly or indirectly – another point of sale in the Franchisee’s exclusive territory.

3.6 Are in-term and post-term non-compete and non-solicitation of customers covenants enforceable?

In-term non-compete obligations are enforceable under French law.

Post-term non-compete provisions are regulated by article L.341-2 of the French Commercial Code, under which non-compete provisions are valid only if they are:

limited to the products and/or services subject to the franchise agreement;

limited to the location where the Franchisee was operating its activity;

justified by the need to protect the transfer of substantial, specific and secret know-how; and

limited to a one-year duration.

These four conditions must all be satisfied.

In-term non-solicitation of customer obligations are valid only if the Franchisee has been granted an exclusive territory and if it is to prevent the Franchisee from performing active sales outside this territory (passive sales outside the Franchisee’s territory cannot be prohibited).

Post-term non-solicitation of customer obligations are not valid: the Franchisee is the owner of its client database and is entitled to use it after the agreement’s termination, under the condition that such use shall not be made with the Franchisor’s trademarks or distinctive signs.

4. Protecting the Brand and Other Intellectual Property

4.1 How are trade marks protected?

Trademarks must be registered in order to be protected.

The Franchisor is able to register a national French trademark before the French National Register (“INPI”) or a European trademark before the European Union Intellectual Property (“EUIPO”).

4.2 Are know-how, trade secrets and other business-critical confidential information (e.g. the Operations Manual) protected by local law?

Know-how, trade secrets and other business-critical information are not protected per se under French law. However, the Franchisor may request the Franchisee to sign a non-disclosure agreement listing precisely which information and data shall be regarded as confidential and not disclosed to third parties, and shall only be used for the need to perform the franchise agreement.

4.3 Is copyright (in the Operations Manual or in proprietary software developed by the franchisor and licensed to the franchisee under the franchise agreement) protected by local law?

Copyright protection may only apply if the Franchisor is able to demonstrate that the operations manuals or other data are original.

Also, French law does not protect ideas or concepts. Therefore, work needs to be sufficiently materialised in a developed form to be eligible for copyright protection.

5. Liability

5.1 What are the remedies that can be enforced against a franchisor for failure to comply with mandatory disclosure obligations? Is a franchisee entitled to rescind the franchise agreement and/or claim damages?

Failure to provide the mandatory disclosure document may incur (i) the cancellation of the contract, or (ii) the Franchisor’s liability.

(i) Cancellation of the contract

Failure to provide the said information may be regarded as fraudulent, justifying the cancellation of the franchise agreement.

However, the cancellation of a franchise contract is subject to the demonstration, by the Franchisee, that the incomplete information/absence of pre-contractual information has invalidated his consent to the contract (Cour de Cassation, Commerciale, February 10th, 1998).

Therefore, the French Courts analyse if the information provided by the Franchisor is sincere and verify if a part of it has been consciously hidden from the Franchisee in order to make him enter into the contract, and/or if missing information that should have been disclosed would have led the Franchisee not to enter into the franchise agreement. Many decisions state that the Franchisor’s presentation is very general and imprecise, or even incorrect, which characterises wilful misrepresentation and justifies the cancellation of the agreement (e.g. Cour de Cassation, Commerciale, May 6th, 2003).

On February 11th, 2003, the highest French Court specified that the obligation to give a sincere presentation applies not just to the information that is required by articles L.330-3 and R.330-1 of the French Commercial Code, but also to any other facultative information voluntarily given by the Franchisor to the Franchisee before it entered into the agreement.

Recently, court cases have tended to focus on business plans/figures provided by Franchisors to future Franchisees. Even if the Courts admit that the Franchisee should personally proceed with a precise analysis of the future commercial operation in order to measure the potential of the business, the Franchisor must ensure that the business plans/figures provided to the Franchisee are not unrealistic or over-optimistic.

On October 26th, 2006, Orleans Court of Appeal was particularly clear on this:

“Even if the Law doesn’t oblige the Franchisor to provide local market research or to establish provisional operating accounts, this task being up to the Franchisee who shall, regarding his investment, proceed to this analysis and evaluate the related risks; it is constant that when providing this information and particularly business plans, the observance of article L.330-3 and of the general obligation to act in good faith in contract law requires the Franchisor to give a sincere presentation of the local market and to establish reasonable budgets by reference to tangible sales figures. […]

Even if the Franchisor is not due to get the results when establishing a provisional operating account, in consideration of commercial contingencies and hazard inherent to every forecast, he must carry out the statistical, economic and financial tools he can get as a franchise professional in the relevant market as well as conduct sufficient research on the local market to provide a reliable provisional study, as this information could be outside the knowledge of the Franchisee candidate. The significant gap between the forecast and the results testifies to the levity of this study.” (Our translation.)

In the same field, the Court of Appeal of Versailles, on June 7th 2007, ruled that a gap of 50% between the Franchisor’s forecast and the results is not sufficient to involve the Franchisor’s liability, as the provisional plan was based on the average sales figures of the time period for equivalent shops effectively generated in the same geographical area. The Franchisor’s obligation to give sincere and loyal information was thus fulfilled, the Court also confirming the Franchisee’s obligation to make enquiries on the project’s profitability and to verify the information given by the Franchisor, with the assistance of professionals if necessary.

Courts can also be very tolerant of Franchisees’ behaviour if they had no previous experience in the operation of a commercial activity before executing the franchise contract. Thus, the highest French Court, on April 3rd, 2007, ruled against the reasoning of the Court of Appeal which had limited, without any debate, the amount of damages to be awarded to the Franchisee because it considered that, with non-existent or imprecise pre-contractual information, the Franchisee should have asked about the relevant details before contracting and had been at fault not to do so.

(ii) Franchisor’s civil liability

Even if the missing information has not been regarded as justifying the cancellation of the franchise agreement, the Franchisor may be held liable, and ordered to indemnify the Franchisee’s damage.

Indeed, the Franchisee may demonstrate that the knowledge of the missing information might have led him to enter into the agreement on different conditions, and that the absence of this information had caused him damage.

For instance, the Paris Court of Appeal considered that the Franchisee’s damage consisted of the absence of having the opportunity “not to contract” or “to limit its financial obligations” (e.g. Paris Court of Appeal, September 20th 2000, confirmed by the Cour de Cassation, Commerciale, February 4th, 2004).

However, the Franchisee still has to demonstrate the existence of a direct link between his damage and the Franchisor’s failure to provide the Pre-contractual Information Document.

5.2 In the case of sub-franchising, how is liability for disclosure non-compliance or for pre-contractual misrepresentation allocated between franchisor and master franchisee? If the franchisor takes an indemnity from the master franchisee in the Master Franchise Agreement, are there any limitations on such an indemnity being enforceable against the master franchisee?

Usually, the Master Franchise Agreement will provide an obligation – for the Master Franchisee – to comply with all mandatory local regulations and to provide Sub-Franchisees with any required disclosure document. In such a case, the Master Franchisee will be liable towards its Sub-Franchisees for disclosure non-compliance or pre-contractual misrepresentation, except if such non-compliance or misrepresentation found its origin in the information or element provided by the Franchisor to the Master Franchisee.

5.3 Can a franchisor successfully avoid liability for pre-contractual misrepresentation by including disclaimer clauses in the franchise agreement?

No, such disclaimer clauses shall be regarded as unenforceable, since the obligation to provide pre-contractual information complying with articles L.330-3 and R.330-1 is mandatory under French law.

5.4 Does the law permit class actions to be brought by a number of aggrieved franchisees and, if so, are class action waiver clauses enforceable?

To date, there is no class action proceeding open to Franchisees regarding a franchise agreement. Class actions are limited to litigation concerning B-to-C relationships. Class action waiver clauses are, in consequence, purposeless.

6. Governing Law

6.1 Is there a requirement for franchise documents to be governed by local law? If not, is there any generally accepted norm relating to choice of governing law, if it is not local law?

Parties are free to decide to submit the franchise relationship to French or any other foreign law.

However, French mandatory regulations cannot be circumvented by using a “choice of law” clause. In particular, the choice of a foreign law does not allow the Franchisor to provide the Franchisee with the mandatory disclosure document.

6.2 Do the local courts provide a remedy, or will they enforce orders granted by other countries’ courts, for interlocutory relief (injunction) against a rogue franchisee to prevent damage to the brand or misuse of business-critical confidential information?

The French Civil Procedure Code provides for general urgent injunctive relief and injunction, which may be sought by the Franchisor before local courts in order to immediately stop any such damage or misuse.

Orders from foreign courts may also be enforced by the French Courts, taking into consideration international treaties and European regulations.

6.3 Is arbitration recognised as a viable means of dispute resolution and is your country a signatory to the New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards? Do businesses that accept arbitration as a form of dispute resolution procedure generally favour any particular set of arbitral rules?

In France, arbitration is recognised as a viable means of dispute resolution. France is one of first signatories to the New York Arbitration Convention, and, as such, accepts the enforcement of foreign arbitral awards. It is indeed recommended to insert into the agreement the arbitration rules and bodies that will govern the arbitration proceeding to avoid any debate afterwards in this respect. There are specialised arbitration bodies with their own rules, such as the Fédération Française de la Franchise, the Marseille Arbitration Chamber for Europe, Africa and Asia, and the Paris Centre for Mediation and Arbitration (“CMAP”).

7. Real Estate

7.1 Generally speaking, is there a typical length of term for a commercial property lease?

Commercial lease agreements are executed for a nine-year duration. However, the tenant has the right to terminate the commercial lease agreement every three years.

7.2 Is the concept of an option/conditional lease assignment over the lease (under which a franchisor has the right to step into the franchisee/tenant’s shoes under the lease, or direct that a third party (often a replacement franchisee) may do so upon the failure of the original tenant or the termination of the franchise agreement) understood and enforceable?

This concept is enforceable under French law if the franchise agreement, as well as the lease agreement, so provide. Indeed, the Lessor has to expressly agree with that principle.

7.3 Are there any restrictions on non-national entities holding any interest in real estate, or being able to sub-lease property?

To our knowledge, there are no restrictions on non-national entities holding an interest in real estate.

7.4 Give a general overview of the commercial real estate market. Specifically, can a tenant reasonably expect to secure an initial rent free period when entering into a new lease (and if so, for how long, generally), or are landlords demanding “key money” (a premium for a lease in a particular location)?

The answer depends on the location, but the French market is usually known to be a very expensive market for real estate costs, in particular concerning “A” locations or mall locations, where key money is indeed generally demanded by landlords.

It is therefore very exceptional to be able to negotiate a rent-free period when entering into a lease agreement, unless specific circumstances justify this free period (such as a need to revamp the location, or a revamping being in progress around the location).

8. Online Trading

8.1 If an online order for products or request for services is received from a potential customer located outside the franchisee’s exclusive territory, can the franchise agreement impose a binding requirement for the request to be re-directed to the franchisee for the territory from which the sales request originated?

No, pursuant to EU Competition guidelines on vertical restrictions, it is not possible to require the Franchisee to refuse “passive sales” and redirect said sales to another Franchisee.

8.2 Are there any limitations on a franchisor being able to require a former franchisee to assign local domain names to the franchisor on the termination or expiry of the franchise agreement?

Local domain names deposited by the Franchisee can remain in their ownership after the termination or expiry of the agreement, unless they contain a trademark registered by the Franchisor. In this case, the Franchisor will be allowed to force the Franchisee to transfer the related domain names. It is recommended to anticipate this situation and insert a clause in the franchise agreement prohibiting the Franchisee to deposit any domain name containing any trademark and/or distinctive sign of the Franchisor.

9. Termination

9.1 Are there any mandatory local laws that might override the termination rights that one might typically expect to see in a franchise agreement?

French Courts are within their rights not to apply the termination rights provided in the franchise agreement in case the termination has not been caused by a breach of a party and is “brutal”. French Courts can thus allocate damages to the party suffering from such brutal termination.

Also, Judges have the right to moderate, reduce or increase a penalty clause.

9.2 Are there local rules that impose a minimum notice period that must be given to bring a business relationship that might have existed for a number of years to an end, which will apply irrespective of the length of the notice period set out in the franchise agreement?

Article L. 442-1, II of the French Commercial Code provides that:

“Any (legal or natural) person operating production, distribution or service activities that terminates abruptly, even partially, an established commercial relationship, without written notice having regard to the duration of the business relationship by reference to usage of trade or to trade agreements, shall be liable towards its counter-part and indemnify the latter of the related damage.

In the event of a dispute between the parties regarding the duration of the prior notice period, the party at the origin of the termination shall not be held liable for an insufficient duration of the prior notice period if a prior notice period of eighteen months has been granted.

The provisions of this § II shall not prevent the right for a party to terminate the related relationship without notice, in the event of non-performance by the other party of its obligations or in the event of a ‘force majeure’ event.”

This rule shall be complied with even in the case where an agreement provided the prior notice period applicable to the contractual relationship.

Furthermore, it is frequently the case that French Courts increase the prior notice period provided in the franchise agreement, taking into consideration the length of the relationship between the parties, the notoriety of the products concerned by the agreement, the dependence of the party victim of the termination towards the other party, the possibility to source rapidly new counterparts in order to perform the same business, or the fact that there would be some unamortised investments linked to the relationship after the termination of the agreement.

10. Joint Employer Risk and Vicarious Liability

10.1 Is there a risk that a franchisor may be regarded as a joint employer with the franchisee in respect of the franchisee’s employees? If so, can anything be done to mitigate this risk?

There is such a risk if the Franchisor acts as the employer of the Franchisee’s employees, in particular if the Franchisor gives them instructions, and is in charge of the labour law duties.

In order to mitigate this risk, it is strongly recommended that the Franchisor has no direct relationship with the Franchisee’s employees, except for the training to be provided by the Franchisor directly to the Franchisee’s staff regarding the application of know-how.

There is also a risk that the Franchise agreement might be qualified as an employment agreement, if the Franchisee is not independent from the Franchisor.

10.2 Is there a risk that a franchisor may be held to be vicariously liable for the acts or omissions of a franchisee’s employees in the performance of the franchisee’s franchised business? If so, can anything be done to mitigate this risk?

The Franchisee is, in essence, independent from the Franchisor and alone bears all liabilities related to its employees’ acts and omissions.

In order to mitigate the risk of a claim directly brought against the Franchisor, the Franchisee has a duty to inform third parties of the fact that it is acting as an independent Franchisee. Such information shall be indicated in the shop, as well as in all commercial documents of the Franchisee.

11. Currency Controls and Taxation

11.1 Are there any restrictions (for example exchange control restrictions) on the payment of royalties to an overseas franchisor?

No, there are no such restrictions.

11.2 Are there any mandatory withholding tax requirements applicable to the payment of royalties under a trade mark licence or in respect of the transfer of technology? Can any withholding tax be avoided by structuring payments due from the franchisee to the franchisor as a management services fee rather than a royalty for the use of a trade mark or technology?

Yes, royalties will be taxed at a 33.33% rate, unless a treaty for the avoidance of double taxation has been entered into between France and the country of origin of the Franchisor. Any arrangement in order to reduce and/or avoid a tax payment may be regarded as fraudulent. Therefore, any specific avoidance strategy shall be subject to the specific advice of a French specialised attorney.

11.3 Are there any requirements for financial transactions, including the payment of franchise fees or royalties, to be conducted in local currency?

There are no specific requirements other than those provided by French tax law.

12. Commercial Agency

12.1 Is there a risk that a franchisee might be treated as the franchisor’s commercial agent? If so, is there anything that can be done to help mitigate this risk?

Such a risk does exist in the case that the Franchisee is acting on behalf of the Franchisor. In order to mitigate this risk, it is, inter alia, necessary to make sure that the Franchisee is the owner or tenant of his location, and is directly paid by consumers.

13. Good Faith and Fair Dealings

13.1 Is there any overriding requirement for a franchisor to deal with a franchisee in good faith and to act fairly in its dealings with franchisees according to some objective test of fairness and reasonableness?

All agreements governed by French law are required to be performed in compliance with a general good faith principle. However, there no test of fairness which needs to be done, and Judges will assess whether the Franchisor’s bad faith has incurred damages to the Franchisee.

14. Ongoing Relationship Issues

14.1 Are there any specific laws regulating the relationship between franchisor and franchisee once the franchise agreement has been entered into?

The relationship between the parties will be governed by the general principles of civil and commercial French laws and regulations.

Furthermore, even though France is not a case-law jurisdiction, as may be the case in common-law countries, French case-law regarding franchise litigation should also be taken into account when drafting and performing a franchise agreement.

15. Franchise Renewal

15.1 What disclosure obligations apply in relation to a renewal of an existing franchise at the end of the franchise agreement term?

If the renewal is operated through a new franchise agreement, the Franchisor has a duty to provide the Franchisee with the mandatory disclosure document (see question 1.5 above).

15.2 Is there any overriding right for a franchisee to be automatically entitled to a renewal or extension of the franchise agreement at the end of the initial term irrespective of the wishes of the franchisor not to renew or extend?

No, unless the Franchisor has expressly made such a commitment in the franchise agreement or in a separate document.

15.3 Is a franchisee that is refused a renewal or extension of its franchise agreement entitled to any compensation or damages as a result of the non-renewal or refusal to extend?

Yes, if the refusal is abusive or “brutal”, which could be the case, for instance, if they had requested the Franchisee to undertake substantial investments/revamping costs in the concept a few months before the termination, where those costs have not been amortised on the expiry date and where the Franchisee would be forced to stop using said concept after the term of the agreement.

16. Franchise Migration

16.1 Is a franchisor entitled to impose restrictions on a franchisee’s freedom to sell, transfer, assign or otherwise dispose of the franchised business?

Yes, the franchise agreement is considered as executed intuitus personae, in consideration of the Franchisee’s person.

Consequently, it is possible to provide a first refusal right in favour of the Franchisor.

16.2 If a franchisee is in breach and the franchise agreement is terminated by the franchisor, will a “step-in” right in the franchise agreement (whereby the franchisor may take over the ownership and management of the franchised business) be recognised by local law, and are there any registration requirements or other formalities that must be complied with to ensure that such a right will be enforceable?

No, there is no such step-in right, the Franchisee being the owner of its business.

16.3 If the franchise agreement contains a power of attorney in favour of the franchisor under which it may complete all necessary formalities required to complete a franchise migration under pre-emption or “step-in” rights, will such a power of attorney be recognised by the courts in the country and be treated as valid? Are there any registration or other formalities that must be complied with to ensure that such a power of attorney will be valid and effective?

This is not applicable in France.

17. Electronic Signatures and Document Retention

17.1 Are there any specific requirements for applying an electronic signature to a franchise agreement (rather than physically signing a “wet ink” version of the agreement), and are electronic signatures recognised as a valid way of creating a binding and enforceable agreement?

French law recognises and values electronic signature as equal to physical signing, provided that it uses a reliable means of identification that guarantees its link with the act to which it is attached. The reliability of these means shall be presumed, until proof to the contrary, when an electronic signature is created, when the identity of the signatory is assured and when the integrity of the act is guaranteed, under the conditions laid down by decree of the Conseil d’État (Article 1367 of the French Civil Code).

Therefore, an electronic signature may be used by Franchisors, but it is not common, physical signing being always preferred.

17.2 If a signed/executed franchise agreement is stored electronically (either having been signed using e-signatures or a “wet ink” version having been scanned and saved as an electronic file), can the paper version of the agreement be destroyed?

French law recognises a reliable copy as having the same probative value as the original. The reliability of the copy shall be presumed, until proof to the contrary is provided, when the integrity of the act is guaranteed, under the conditions laid down by decree of the Conseil d’État (Article 1379 of the French Civil Code). Therefore, for safety reasons it is recommended to keep the original.

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